Impact investing aims to provide an economic-business response to social or environmental problems and seeks to produce quantifiable social or environmental benefit alongside economic profit.
Assessment of these investments therefore focuses on a double bottom line – social and financial. This contrasts with traditional investment analysis which is based solely on parameters of financial yield and risk.
In recent years, the business world has discovered the advantages of these impact investments, not just as a profitable financial vehicle but also as a tool for leading social change and as a policy that enables better relations between employees, suppliers, client communities and shareholders alike.
In September 2015, the UN determined a series of ‘Sustainable Development Goals’ (SDGs) for the coming decades. A total of 17 goals, 169 objectives and 230 indices were determined after a lengthy consultation process involving governments, international entities, the World Bank, the OECD, academia, the business sector, and civil society organizations. The goals relate to a range of issues, e.g. eradicating poverty and environmental preservation, alongside socio-economic goals such as gender equality, occupational fairness, and economic growth. Detailed objectives and indices were determined to track each country’s progress, both in relation to itself and to global standards. Impact investments are one expression of how these goals are being implemented. According to the annual report of the GIIN (Global Impact Investing Network), impact investments totaled approximately 500 billion dollars during 2018 – double the level of the previous year.
Although the Israeli impact ecosystem is still in its infancy, the State of Israel is striving to implement the sustainable development goals in order to guarantee nationwide development for all sectors of society. The guiding principle is improvement in all parameters – even for the weakest sectors of the population. The impact investment market is growing rapidly. According to a 2019 report published by the OurCrowd Foundation together with Social Finance Israel, this market is estimated at approx. 260 million dollars a year (double that of 2018).
The Innovation Authority, which views technological innovation as leverage to inclusive and sustainable economic growth, operates a variety of incentive programs that support technological R&D offering responses to social and public challenges such as: improving the public service provided by government ministries, better access to information, streamlining the health system, enhancing the level of both formal and informal education in Israel, combatting loneliness among senior citizens, integrating populations with disabilities into all facets of society and life and more. The rationale behind these incentive programs is that the country profits twice – both from the initiative’s economic-business activity (tax income, job creation etc.) and from its impact on economic indices such as productivity, participation in the workforce and others.
Furthermore, the Authority operates specially designated tracks that offer increased support for entrepreneurs from sectors of Israeli society under-represented in the Israeli innovation ecosystem – Israeli Arabs, the ultra-Orthodox and women – with the track for women being launched in March 2019. These programs are aimed at increasing the number of entrepreneurs, bolstering the success of their initiatives, and increasing the number of high-quality requests submitted to the Authority.
Israel has the potential to be a world leader in the impact investing market by constituting a source of innovative solutions for the large challenges facing humanity, while building a dynamic Israeli ecosystem of initiatives and investors.